Britons need to find more than £300bn if they are to retire on the recommended 70% of their salaries, according to a report by Aviva.

The average savings shortfall for each worker amounts to £10,000 a year, the report says, which for many people over 50 will be impossible to close.

Decades of low contributions to state and private pensions has left the UK with one of the worst pension systems in Europe. Research for the insurer found that the UK faces a savings gap equal to 26% of national income, compared to 17% in France and 18% in Spain. Only Russia, which has a dramatically ageing population, saves less towards the pensions of its people. Germany, which also suffers from a low birth rate and long life expectancy for retirees, suffers a similar problem to the UK, albeit from a largely state-supported retirement scheme.

The total shortfall across Europe has reached €1.9tn (£1.6tn) according to the report. Aviva said it used the 70% living pension benchmark adopted by the Paris-based thinktank, the Organisation for Economic Co-operation and Development (OECD). The OECD said every pensioner needs to accumulate income worth 70% of their final salary through a mix of savings and state benefits.

Many people are using investments in property and other assets to pay for their retirement, but overall these will make only a small dent in the funding deficit, said Aviva. Acceptance that retirees will need to survive on 50% of their final income will cut the €1.9tn figure to €669bn. Raising the retirement age by 10 years would have a similar, though not quite as dramatic effect on the funding gap.

Pension policy experts are split over the direction governments should take to close the funding gap. The Turner review of pensions in 2003 argued saving in a low- cost scheme invested in the stock market would go some way to closing the gap.

Frank Field, the Labour MP and adviser to the coalition on poverty, has recommended an extension of the national insurance scheme with individual savings pots and guarantees of minimum incomes for savers. Critics of the private savings industry, however, have argued that most of the benefits are siphoned off in commissions and charges by providers, with little benefit going to individuals.

Andrea Moneta, chief executive of Aviva's European operations, said: "Measures taken recently by national governments and the publication of the pensions green paper by the European commission are positive steps but we need more and to turn new ideas into actions quickly."

James Walsh, senior policy adviser for the National Association of Pension Funds, said: "We don't think that extra European legislation will help alleviate the problem. The UK already has a well-regulated pensions infrastructure. The main thing is to get people saving more."